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European Earnings: Philips Profit Tumbles

Dutch company Philips Electronics was the latest company to say it predicts a slowdown in developed economies after reporting a sharp drop in quarterly operating profit Monday that exceeded analysts' expectations.

French food company Danone was more upbeat, posting a solid rise in comparable quarterly sales and affirming full-year guidance.

Philips lost 3.3 percent in Amsterdam, while Danone bucked the overall market trend and gained 2.7 percent.

The Dutch electric razors-to-lightbulbs group said first-quarter earnings before interest, tax and amortisation (EBITA) fell to 265 million euros ($419 million) -- down from 370 million the year before and compared with an average of 306 million euros in a Reuters poll of 14 analysts.

"Our results are clouded, more than we like, by the adverse situation in our TV business, significantly lower incidental license income and some acquisition-related charges," Chief Executive Gerard Kleisterlee said in a statement.

The company's TV business is suffering from tough competition, especially in the United States, from low-cost rivals such as Taiwanese Amtran's Vizio brand.

Philips said it expected "some mature economies" to soften in the wake of a global credit crisis.

"It is a situation we are watching, the economy, and if there are things to be done we would do them without wasting time," Chief Financial Officer Pierre-Jean Sivignon told reporters on a conference call, without elaborating.

Danone Confident for 2008

Danone, the maker of Actimel yogurt and Evian bottled water said sales rose to 3.76 billion euros ($5.95 billion).

The company had strong sales growth at its baby nutritional products division, boosted by Danone's takeover of Dutch babyfood maker Numico last year.

Like-for-like sales growth, excluding the impact of acquisitions and foreign exchange rate fluctuations, during the first quarter stood at 11.4 percent.

Danone reiterated its 2008 target for sales growth of between 8 and 10 percent and for underlying earnings per share growth of at least 15 percent.

"Danone put out a good set of numbers," said Agilis Gestion fund manager Frederic Hamm.

-- Reuters contributed to this report

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